President Donald Trump signed the Tax Cuts and Jobs Act into law on Dec. 22, 2017.
The legislation repeals the tax penalties associated with the Affordable Care Act’s individual mandate beginning in 2019. The mandate, which went into effect in 2014, requires individuals to purchase qualifying health insurance coverage or pay a penalty.
Various key tax changes relating to health care in the legislation include:
Key tax change
Health care tax changes
The medical expense deduction is available to the extent the expenses exceed 7.5 percent of adjusted gross income (down from 10 percent) for 2017 and 2018. The deduction returns to expenses exceeding 10 percent of adjusted gross income in 2019.
The “orphan drug” credit is reduced from 50 percent to 25 percent effective after Dec. 31, 2017.
Employer or employee tax changes
The tax exclusion is retained for employer-provided insurance.
The exclusion is retained for the dependent care flexible spending arrangement, or dependent care FSA, contribution.
In addition, we’ll closely monitor introduced legislation that addresses the federal insurance premium tax, the Cadillac tax, the medical device tax and the treatment of over-the-counter drugs through spending accounts.
Congress passes resolution to fund federal government through Jan. 19
On Dec. 21, 2017, the U.S. Congress approved a resolution to fund the government through Jan. 19, 2018.
The continuing resolution includes $2.85 billion in federal funding for the Children’s Health Insurance Program, or CHIP, for a six-month period ending on March 31, 2018.
CHIP, administered by U.S. Department of Health and Human Services, provides matching funds for states to provide low-cost health insurance to children whose family income level is too high to qualify for Medicaid.
Proposed rule on association health plans released
Today, the Employee Benefits Security Administration released a proposed rule expanding the scope of association health plans. We’ll provide more information about the proposed rule in the next edition of Reform Insights.